What typically happens when an insured's property policy has an agreed value clause?

When an insured's property policy includes an agreed value clause, it establishes a predetermined value for loss settlement between the insurer and the insured. This means that in the event of a claim, the insurer will pay out the agreed amount stated in the policy, rather than determining the value at the time of loss or based on some other valuation method.

This arrangement is particularly beneficial for both parties, as it provides clarity and certainty about the coverage amount, reducing disputes and simplifying the claims process. The agreed value reflects the true worth of the property as recognized by both the insurer and the insured at the time the policy is issued, often applicable in cases where property values may fluctuate over time.

In contrast, other options do not align with the definition and function of an agreed value clause. For instance, requiring invoices for all property implies an ongoing obligation to prove value, which is not necessary under an agreed value clause. Similarly, covering property for its depreciated value or only considering actual cash value contradicts the essence of this clause, which simplifies the claim by avoiding valuation adjustments based on depreciation or fluctuating market conditions.